1. Supply

2. Supply Schedule P Qs Oranges $4/lb. 1.2 million $3/lb. 1million $2/lb.

3. Law of Supply As P , QS (As P , QS )
There is a direct relationship between P and QS
NOT As P , S
NOT As QS , P
NOT As S , D

4. Supply Curve P S $4 $3 $2 Qs
.5m m m
Oranges

5. Supply Curve P S P2 P1 Qs Q1 Q2
Oranges

6. Shape and Slope of a Supply Curve
Positive (slopes upward from l-r)
Why?
Law of Supply
(direct relationship between P and Q)
Why true?
Profit Motive
TR – TC = Profit (Total Revenue – Total Cost)

7. Shape and Slope of a Supply Curve
Curved (not a straight line)
Why?
Law of Increasing Marginal Cost
(the flower pot effect)

8. Supply Curve P S Q
capacity
Oranges

9. A change in price can only cause:
A change in quantity supplied, not a change in supply.
A change in quantity supplied is shown as a movement along the supply curve.
A change in supply refers to a movement of the entire curve.

10. Supply Curve
*Suppliers are now willing and able to supply more at every price. P S S1
An increase in supply is a shift to the right.
(Decrease is a shift to the left.) P1 Q Q1 Q2
Oranges

11. Determinants of Supply
What causes a change in supply
(a movement of the entire curve)
Change in the number of suppliers
Change in the cost of production